Beijing Oriental Yuhong Waterproof Technology (SZSE:002271) sheds CN¥1.9b, company earnings and investor returns have been trending downwards for past three years

While not a mind-blowing move, it is good to see that the Beijing Oriental Yuhong Waterproof Technology Co., Ltd. (SZSE:002271) share price has gained 24% in the last three months. But that is meagre solace in the face of the shocking decline over three years. To wit, the share price sky-dived 74% in that time. So it's about time shareholders saw some gains. Of course the real question is whether the business can sustain a turnaround.

If the past week is anything to go by, investor sentiment for Beijing Oriental Yuhong Waterproof Technology isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for Beijing Oriental Yuhong Waterproof Technology

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the three years that the share price fell, Beijing Oriental Yuhong Waterproof Technology's earnings per share (EPS) dropped by 33% each year. This fall in EPS isn't far from the rate of share price decline, which was 36% per year. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It might be well worthwhile taking a look at our free report on Beijing Oriental Yuhong Waterproof Technology's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Beijing Oriental Yuhong Waterproof Technology's TSR for the last 3 years was -71%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Beijing Oriental Yuhong Waterproof Technology shareholders are down 27% for the year (even including dividends), but the market itself is up 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 3% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Beijing Oriental Yuhong Waterproof Technology better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Beijing Oriental Yuhong Waterproof Technology , and understanding them should be part of your investment process.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.